The Securities and Exchange Board of India (SEBI) has set a minimum investment threshold of Rs 10 lakh for Scheme of Investment Funds (SIFs). This higher entry point is due to the increased complexity of SIFs, which often involve the use of derivatives and may have limited liquidity in certain categories. According to industry experts, derivatives require a deeper understanding and nuance, making them more suitable for savvier investors.
The use of derivatives in SIFs can be complex, and the liquidity terms may differ from the daily liquidity typically associated with mutual funds. As a result, SEBI mandates that SIFs operate under a distinct brand to differentiate them from traditional mutual funds. This separation is intended to provide clarity for investors and ensure that they understand the unique characteristics and risks associated with SIFs.
The creation of a separate brand name, such as ‘Altiva SIF’, is a deliberate effort to distinguish SIFs from traditional mutual funds. This separation is necessary because SIFs cater to investors with a higher risk appetite and greater financial literacy. By setting a higher minimum investment threshold and requiring a distinct brand, SEBI aims to ensure that investors are aware of the potential risks and complexities involved with SIFs.
The higher minimum investment threshold of Rs 10 lakh is designed to filter out investors who may not have the necessary financial sophistication or risk tolerance to invest in SIFs. By limiting access to these funds, SEBI hopes to protect investors from potential losses and ensure that they are making informed investment decisions. Overall, the regulations surrounding SIFs are intended to promote transparency, clarity, and investor protection in the Indian mutual fund industry.